Microsoft Completes Nokia Phone-Unit Purchase in Push to Mobile

Published : 2014-04-25 20:25
Updated : 2014-04-25 20:25

Microsoft Corp. completed its deal to take over Nokia Oyj’s phone business, ending a seven-month wait to renew its assault on the mobile market and leaving the Finnish company seeking growth in wireless networks.

The final price may be “slightly higher” than the 5.44 billion euros ($7.5 billion) announced in September, Nokia said today in a statement. About 30,000 employees are transferring to Redmond, Washington-based Microsoft as part of the transaction, which was delayed amid regulatory scrutiny.

Microsoft, the world’s largest software maker, is gaining a device business that it’ll bet on to catch up with Apple and Google in the tablet and mobile-phone markets. Nokia is left seeking a turnaround for its network-equipment business and is said to consider the division’s head, Rajeev Suri, as chief executive officer to challenge rivals such as Ericsson AB.

The purchase of the unprofitable division makes Microsoft the world’s second-largest maker of mobile phones with about 14 percent of the market, according to researcher IDC. In smartphones, the most profitable part of the industry, Microsoft will continue to lag far behind rivals. Apple and Google’s Android accounted for about 96 percent of the 290 million smartphones shipped in the fourth quarter last year, according to IDC. Microsoft’s Windows Phone had 3 percent of the market.

Microsoft unveiled this month an updated version of its Windows Phone software with voice-search features and said it’s offering the platform for free for small phones and tablets as part of CEO Satya Nadella’s turnaround.

Nokia, once the smartphone market leader, is evaluating its strategy for its future without the phone business. The Espoo, Finland-based company said in March it aims to be able to discuss the outcome of the review at the end of April. The company is scheduled to report first-quarter earnings April 29.

Suri will be named CEO that day, newspaper Helsingin Sanomat reported today, citing two unidentified people familiar with the matter. James Etheridge, a spokesman for Nokia, declined to comment. Suri is among candidates for the top job as 149-year-old Nokia is seeking a leader to revive the company, people with knowledge of the matter said in January.

The new CEO will replace Stephen Elop, who is returning to Microsoft as executive vice president of the devices group. He joined Nokia in 2010 and stepped down as CEO when the sale to Microsoft was announced.

Shares of Nokia have risen about 80 percent since the companies disclosed the deal, and advanced 1 percent to 5.34 euros at 2 p.m. in Helsinki. Microsoft has added 19 percent.

Nokia, which is receiving the Microsoft deal proceeds in cash, said in January it plans to decide on a dividend payment after the sale is completed. The company’s debt is ranked junk by the the three main rating companies.

After the sale, Nokia will get about 90 percent of its revenue from base stations, antennas and other network equipment as well as related services it sells to wireless carriers. In that business, the company competes against Sweden’s Ericsson (ERICB), China’s Huawei Technologies Co. and France’s Alcatel-Lucent SA.

Nokia is seeking partnerships similar to a pact it has with Juniper Networks Inc. to expand its networks business, Suri said in an interview in February. Last year, Nokia considered buying the wireless-equipment unit of Alcatel-Lucent, people familiar with the matter have said.

In addition to network gear, Nokia has a digital-maps business and a unit that licenses its patents.

Nadella, who was named CEO on Feb. 4, is working to remake Microsoft for an era where smartphones and tablets have become central. To do so, he must strike a balance between offering Microsoft’s software for competing platforms while still keeping the company’s Windows operating system as a core focus.

Windows stands to be the fastest-growing smartphone operating system over the next four years with 30 percent annual growth, according to IDC. Even at that rate, Windows Phone would only make up 7 percent of the total market in 2018.

Microsoft’s new handset division will begin selling phones using Windows Phone 8.1, Elop said this month. A high-end device called 930 will debut in June and feature wireless charging, while two cheaper phones designed for emerging markets will become available in May, Elop said. (Bloomberg)